Mahama Misses Fiscal Deficit Target

President John Mahama says his outgoing administration failed to achieve the fiscal deficit target of 5.3 percent for this year because of numerous factors such as reduced lifting from the Jubilee Oilfield on account of turret bearing problems.

Delivering his last ‘State of the Nation Address’ yesterday in Parliament, the President also cited non-realization of some expected non-tax revenue such as the sale of electro-magnetic spectrum, reduced cocoa export revenue and higher than expected election-related expenditures as some of the reasons.

“In spite of the breach of the fiscal deficit target, expenditure was lower than programmed and thus the approved appropriation for 2016 was not exceeded.”

IMF deal

According to him, his administration inherited an economy that was running a high deficit, with increasing inflation and interest rates characterized by a rapidly depreciating currency.

“This unstable macro-environment created an unfavourable investment environment for both indigenous and foreign capital.

“Our forum at Senchi was an attempt to forge a consensus for a homegrown fiscal consolidation programme. The Senchi outcome eventually became the basis for the IMF Extended Credit Facility (ECF) programme we are implementing. The ECF programme has resulted in an improved macro environment which is seeing a steady decline in inflation and interest rates.”

Debt control

He also added that a new public debt management strategy had led to a steady decline in public sector debt, estimated to have dropped from nearly 72 percent to below 65 percent.

“The currency has also enjoyed relative stability, depreciating at just above 4 percent this year. Mr. Speaker, while the deficit target will be missed this year on account of inability to meet revenue targets, it is important for us to continue to pursue fiscal consolidation in the 3rd and final year of the programme. Ghana’s economy is still the second largest in West Africa with a GDP of almost $39 billion. “Ghana has also moved up 13 places in the ease of doing business index and is currently considered number one on the World Bank index.”

Power sector

Touching on the power sector, he said: “We added more than 800MW of power over an 18-month period. This increased generation, in addition to the Energy Sector Levy and ongoing works to restructure the legacy debt of the power utilities, has helped to stabilize the power situation. With the expectation of more domestic gas from the TEN and Sankofa Fields, Ghana is entering into an era of energy self-sufficiency. Indeed, the warning signals have started sounding about the danger of over-capacity and excess redundancy in the power sector. “We have agreed to work with the World Bank to rationalize the addition of new plants and ensure that we achieve optimum utilization of existing capacity.

“Access to power under my administration has continued to increase. Ghana has one of the highest access to electricity estimated to be above 80 percent currently. Additional pending electrification programmes like the China Water Company and the Hunan Energy projects will bring even more communities onto the national grid.”